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How Tax Reform Will Impact Retail and Consumer Products

Written by By Scott Ziemer on February 5, 2018

On December 22, 2017, the conference version of the tax reform bill was signed into law, marking the largest change to U.S. tax policy in decades.

With most of the provisions set to go into effect in 2018, it’s important that the retail and consumer products industries review these legislative changes to understand the impact to their businesses.

What Changes Await Retail and Consumer Products?
To help businesses navigate the key provisions affecting retail and consumer products, we’ve summarized top considerations and implications here.

TACKLING TAX REFORM: 5 STEPS RETAILERS CAN TAKE NOW
Tax professionals are busy assessing changes caused by this bill and are waiting for additional guidance on many key provisions to ensure the overall impact is fully understood. In the interim, here are five steps retailers can take now to begin tackling tax reform:1. Assess impact. Tax professionals will likely need to review the bill text manually and measure their organization’s specific circumstances against it to assess the impact of each provision, as well as the holistic effect on their bottom line.2. Establish priorities. When considering what to undertake in the coming months, focus on the areas that could have the greatest impact on your organization. Consider your expansion plans and remodels, factoring in the write-offs that are now available. It would also be wise to look at how your businesses tax liability will change: C corporations can measure expected tax payments and S corporations and partnerships can look at tax distributions to see how that will change this year.3. Initiate tax reform conversations with your tax advisor. Tax reform of this magnitude is the biggest change we’ve seen in a generation and will require intense focus to understand not only how the changes apply at a federal level, but also to navigate the ripple effect this is likely to have on state taxation.4. Reevaluate R&D tax credits. Given the new limitations to carryback for net-operating losses, retailers should revisit the R&D credit, which can be used for process improvements. Now that retailers are expected to have competitive omnichannel strategies, many initiatives to improve the process of their technologies and platforms could qualify for the R&D tax credit.5. Pay attention to states’ compliance. State governments likely won’t follow every federal provisional change, especially bonus depreciation. Efficient state tax structures will become more important for companies under tax reform. Most companies will find state tax expenses will become a larger portion of their total tax expense. Although states rarely provide income tax incentives to retailers, they also have employment and training tax credits to attract retailers; companies should revisit these opportunities.